Stopping the Clock On Retirement: Target Wealth Stopping Time Problems
36 Pages Posted: 6 Nov 2019 Last revised: 26 Dec 2019
Date Written: June 6, 2019
Retirement planning attempts to build sufficient funds to retire at a fixed, predefined horizon. In that the only guaranteed way to hit a target wealth at a fixed horizon is by appropriate risk free investments, these strategies either have a large risk of falling short of the goal or require excessive savings.
In this paper, we investigate what we consider to be a more useful approach. Instead of optimizing wealth at a fixed future time, we optimize on the stopping time at which one has sufficient wealth. This builds on an approach to retirement suggested by Bode in "Retirement Investing: A New Approach", 2001.
Keywords: Retirement, pension, portfolio optimization
JEL Classification: G11
Suggested Citation: Suggested Citation